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A solution to the US medicare problems

I was not at all surprised by the Slashdot story on medicare outsourcing to India.

Since relocating to US from India in 1998, I have always wondered about the astronomical cost difference of medical care between these two countries. To get an idea of this cost difference, let me cite an example from my own personal experience. My older daughter was born in a posh hospital of Bangalore and the total medical bill was less than Rs. 20,000/- (approximately $500.00). Just after four years, the younger one was born in a not-so-posh US hospital with a medical bill in excess of $13,000.00. Even if we account for inflation in the intervening 4 years, the difference is more than 20 times. This is the same multiple reported in the Slashdot story.

How does this compare with difference in cost of living? Per my personal experience, this difference is roughly 4-5 times. The US apartment I was renting in year 1998-2003 was $1500.00 per month. I would have got a similar apartment in Bangalore for $300.00 per month. Same was true for my salary. Haven't kept track of the current costs but dodn't expect the difference multiple to be much different.

So what explains this difference? Few good answer comes from the notes of an emergency physician. I particularly agree with the point that the spreading of the cost through insurance companies has skewed the natural market forces with no incentive for patients to go for the best quality at the least price. Afterall, the $13,000.00 medical bill for the birth of my younger daughter was paid by the insurance company, not me. In absence of any real competition, the providers simply don't innovate to bring down the cost. The same point was brought out by Michael Porter in his HBR article on Fixing Competition in U.S. Health Care.

Let us hope that competition from Indian hospitals, hopefully aided by US healthcare insurance companies (think of policies with lower premiums but with provision for certain kind of treatments being done in Inida), would eventually bring down the US medicare costs and be a viable solution to the nation's ballooning medicare problem. I can almost "see" the value chain: a new breed of insurance companies selling policies with low premiums (and hence snatching marketshare from established ones); dispatch agencies specializing in doing the paper work and taking care of local logistics; airlines with specially designed aircrafts and other services for transporting patients and Indian agencies and hospitals specializing in medical care of out-of-country patients.

I believe this will be good thing to happen. Seniors will be able to get timely medical service and the younger generation will have to pay less for care of elderly.


This page contains a single entry from the blog posted on October 23, 2004 10:43 AM.

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